Kerry sees huge uptick in premium logistics

Company predicts efficient operations will likely become increasingly complicated

Kerry Logistics Network Ltd, one of Asia's leading integrated logistics and international freight forwarding businesses, is predicting huge potential growth in complicated logistics in the Chinese mainland, as the country's services industry continues to expand.

"Efficient logistics will become increasingly complicated and important, and we view this as a great opportunity, as our strength lies in providing just this kind of premium service," said George Yeo, chairman of Kerry Logistics Network, and vice-chairman of Kerry Group.

He said for different sectors such as healthcare, restaurants, tourism, entertainment and education, logistics requirement can be very different. As the growth momentum in the service industry continues, there will be huge potential for Kerry Logistics to further tap into the market of complicated logistics, Yeo explained.

In January, the Hong Kong-based third-party logistics provider was granted the government license to operate in the mainland express-delivery market, evidence the central government is determined to further open up the domestic market for express delivery to overseas couriers too, as long as they meet certain criteria.

"Opening up the domestic express-services market to outside companies creates a lot of competition－that's good for Chinese consumers and producers, and for companies supplying into China," said Yeo.

Kerry's strategy of expanding its express business in the mainland is focused on both business-to-business and business-to-customer sectors, especially for those requiring delicate deliveries.

Yeo said the mainland's so-called customer-to-customer sector, is also becoming highly competitive and the company is yet to have the ability to throw that into its service mix.

"We're looking at possible cooperation agreements, and even acquisitions of domestic express companies right now," said Yeo, without going into further detail.

During the first half of this year, Kerry Logistics' turnover grew by 2 percent to HK$10.135 billion ($1.31 billion) year-on-year, while net profit increased 11 percent to HK$542 million compared to last year, according the company's latest financial report.

William Ma, Kerry Logistics' group managing director, said: "The group was able to achieve steady growth in overall operating profits, while businesses in the Greater China region remained relatively stable driven by strong performances in Hong Kong and Taiwan."

In April, subsidiary Kerry Logistics (China) Investment Ltd signed a strategic cooperation agreement with China Railway Import and Export Co, aiming at leveraging China Railway's experience in taking on key domestic and international projects and its extensive railway network, as well as integrating these advantages with Kerry Logistics' own strong network in Southeast Asia and its logistics service expertise.

"The logistics market in the Chinese mainland will become more segmented and for each specific sector there will be more customized requirements on the logistics services they demand," said Zhou Zhicheng, deputy director for research at the Beijing-based China Federation of Logistics and Purchasing.

"As far as I know, Kerry is strong in delivering fashion products, for example apparel. But in each specific sector in the Chinese mainland, there are other third-party logistics service providers serving clients," said Zhou.

"The biggest challenge in expanding our business in the Chinese mainland is that China is very big, and it is changing all the time," said Yeo.